Courtesy of Perrigo Co.An employee collects a sample of Ibuprofen from a continuous coater in Perrigo Co.'s tablet manufacturing facility in Allegan. Perrigo is a major producer of ibuprofen.

KALAMAZOO — If over the last 10 to 20 years you’ve bought over-the-counter cough-and-cold products, pain relievers, laxatives
or allergy products that weren’t the name-brand products — those “knock-off,” generic products in packages that look like
the name brand but aren’t — you’re probably a Perrigo customer.

“It’s every major retailer,” says Art
Shannon, vice president of investor relations and corporate
communications for Allegan-based
Perrigo Co. “It’s CVS, Walgreens, Target. We do Meijer. We have a
70 percent market share of over-the-counter, store-brand
health care. ... So if you go and get the store brand, more than
likely it’s us.”

Since Sam Walton and his Wal-Mart Stores became a customer of the company in the late 1980s, and Wal-Mart’s growth took off,
Perrigo has become the dominant seller of pharmaceuticals, nutritional products and otherhealth care products sold under the labels
of major retailers, supermarkets and mass merchandise stores. And while
the economy
has been bad over the past few years, the company has prospered,
seeing compound annual growth in sales over the last three
years of 18 percent.

Courtesy of Perrigo Co.Art Shannon, vice president of investor relations and corporate communications for Perrigo Co., says retailers are enjoying a greater profit margin on the store-brand products, and consumers continue to find value in store-brand products.

Key growth drivers for the company are
accelerated use of store-brand products by the public and new product
launches, he
said, including that for the store-brand version of the allergy
treatment Allegra and the store-brand version of the pain-reliever
Aleve Liquid Gels.

Shannon said retailers also have been
marketing store-brand products well through the Great Recession, calling
attention
to the retail price difference between store-brand products such
as smoking-cessation aid “Nicotine Gum” and GlaxoSmithKline’s
name-brand “Nicorette.” One 4-mg, 200-count pack of Nicorette sells for about
$71.59. Produced by Perrigo and sold by stores such as
CVS pharmacies, a comparable pack of Nicotine Gum sells for about
$52.99. That is about a 26 percent retail price difference.

Retailers also are enjoying a greater
profit margin on such products, Shannon said. The margin on the
Nicorette product is
about $14.32, or about 20 percent, he said, compared to a $29.49,
or about 56 percent, profit margin for the store-brand product.

“That’s why the retailers want us so bad,”
Shannon said. “They’re making more money on our product. It’s also a
great promotional
tool for them.”

Allegan’s largest employer, with about
3,800 local employees, has worked hard to become one-stop-shopping for
its retail store
customers, producing in-demand products, creating packaging that
looks as much like that of name-brand products, and packaging
its products in any amount or configuration requested by
retailers.

“We call it mass complexity. What that is is you do everything for the retailer,” Shannon said. “It’s basically turnkey for
the retailer. So (with) a new product launch like Omeprazole, which is Prilosec OTC (over the counter), we will do end-cap
display. We will have it all for them so we put it on pallets and give it right to them.”

We tried to catch up with Perrigo during a recent interview with Shannon at the company’s Eastern Avenue headquarters:

Q: How have things gone during the recession?

A: We’re up very dramatically during the
Great Recession. Store-brand market share grew. On average, we have
been growing about
100 basis points a year, or 1 percent a year. We grew 300 basis
points from 2009 to fiscal 2010. People are trying to save
where they can. At the same time, retailers are promoting the heck
out of their store brands. And so the combination has really
helped us. Plus we have had a lot of good new products over that
time that have come across — (store-brand equivalents of)
Zyrtec and Prilosec are two of the big ones.

Q: What did the company have to do to
rectify concerns expressed in a warning letter it received in April 2010
from the U.S.
Food and Drug Administration? (Perrigo was cited for glitches at
its 515 Eastern Ave. plant, ranging from an equipment failure
that shredded metal shavings into bottles, to having random brown
ibuprofen tablets show up in batches of orange caplets of
the same drug.)

A: What we did was we looked at our
processes and we took a step back. The FDA said, ‘Great catching things.
Let’s take a step
back and try to avoid such things in the first place.’ So we took a
step back. We hired an outside consultant. ... We said.
‘OK, what would make sense in this case? We made a lot of things
(on production line equipment) Plexiglas. What used to be
metal is now Plexiglas. You can see right through. It makes
cleanings a lot easier. Lighting is better. ... The whole process
was we have to be better at cleaning. Our cleaning processes are
good but they’re not perfect. Let’s try to get to perfect...
We used to do line cleanings every 15 batches. We now do them at
five. It impacts throughout. You;re not pumping out like
you used to. But you’re better at the process.(Shannon said company Chairman and CEO Joseph Papa and company workers also embraced the process, which was difficult but now makes them feel it is a better company and is ahead of the game.)

Q: What are the challenges now?

A: For us right now, it’s to meet the demand. It’s to keep the quality level and keep raising the bar on quality, and we’re
doing that every day.(He cited a great demand for store-brand Allegra, which was launch in April.) The demand comes from the retailers. They let us know that this product is doing really, really well, and we start cranking
out more.

Q: When you introduce a product to your retail customers, is there a target market share you have to have to make it worth your
while?

A: No. The overall market share for store brands is around 28 percent, and we just find on new product launches or higher priced
products, we do better than that. So we’ll end up higher than that.In Nicotine Gum, we have a nicotine gum store brand of Nicorette, we have 60 percent (market) share because it’s so high priced. It’s
$50 a pack for the national brand. It’s $28 for the store brand. So it’s a huge price difference.

Q: Who makes the decision on what products Perrigo makes?

A: What we like to produce is anything that is FDA approved. That’s the way we differentiate it. ... We want to have FDA-approved
products. That way it’s a lot tougher to make.(He said Perrigo has to clear the same hurdles that major pharmaceutical companies go through to get product manufacturing
approved.) We have to show bioequivalency. We have to
show that that product works as well as the national brand. It treats
the same
at the same indications. That’s the differentiator. So we’ll get
into things like cough and cold products, analgesics. We’ll
get into gastrointestinal products like Prilosec.

Q: Any plans to do ingestible pharmaceutical products?

A: We do some oral, solid-dose (medications), but usually, when we’re doing that, (it is something) we expect it to switch over
to OTC. With Zyrtec, we were on the prescription side before it switched over to OTC.

Q: Are there any challenges remaining for the generics? In the early goings, people asked: “Is this as good as Prilosec OTC?
Is this as good as Advil?” So do generics still face any of those comparative challenges?

A: In general no. On a new product launch, Omeprazole is a good example, we’re up to a 40 percent-plus market share of the overall
market share — by unit.

— Al Jones can be reached at ajones@kalamazoogazette.com or at 269-388-8556.